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A blog about housing in Japan

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Last week the government released population figures for 2017 and to nobody’s surprise the Tokyo metropolitan area was the only region that saw any increases. Given that Japan’s overall population is dropping, it was notable that the three prefectures surrounding the capital saw increases, even if they were very slight.

It would be interesting to know how much of these increases were attributable to the construction boom in so-called tower mansions, or high-rise condos. Two weeks ago, NHK aired a look at the boom that attempted to weigh the merits of high-rise living with the demerits. Until recently, most of the tower condos, which the program defines as a building of at least 20 floors, or 60 meters, were being built on the Tokyo waterfront, but now they are popping up like spring bamboo in satellite cities like Kawasaki, Saitama, and Kashiwa, because local governments are encouraging developers to build them with subsidies. In 1999, the year before national building regulations were eased, there were only 150 tower condos nationwide, but by 2016 there were about 800.

The NHK show was particularly interesting to us, not only because we once lived in a high-rish in the shitamachi district of Tokyo (we rented, though), but also in the past resided in the two cities that were profiled in the report, Kawasaki and Saitama. In the case of the latter, when we lived there it was before the merger of Urawa and Omiya, and there were no tower condos near Omiya station, one of the biggest transporation hubs on the Kanto plain. Now, within walking distance of the station, there are 2,700 relatively new condo units in skyscrapers, and they’re very popular, it seems. A new building that recently opened has 776 units and they all sold out almost immediately. NHK visited one couple with two kids who bought their 3LDK, just four minutes from the station, for ¥50 million two years ago, which is about ¥10-20 million cheaper than such a place would cost in Tokyo. The wife works in Takadanobaba and the husband in northern Saitama prefecture, so their home is right in the middle. The say they are “100 percent” satisified with their purchase, and NHK attributed the popularity of tower condos to the kind of facilities they offer. This particular building included a gymnasium, a theater room, a music room, hotel rooms for guests, a dance studio, and lots of amenities. Read More

It’s become an almost trite litany in the media: the poor become poorer and the rich richer, with the middle class mostly shrinking and absorbed by the former. The conventional narrative says that free market capitalism makes this so, as governments in the free world become “smaller” and thus less likely to regulate economic functions. But more fundamental to the issue is the idea that priorities are shifting away from the poor.

An article in the Dec. 3 Nihon Keizai Shimbun reports on a survey completed by the Ministry of Internal Affairs and Communications in September and just released to the public. The survey collected data from local governments regarding public buildings, including apartments and schools. One of the more startling statistics is 12,251, which represents the total number of these buildings that local governments throughout Japan, both prefectural and municipal, want to tear down. The estimated cost of this mass demolition would be ¥403.9 billion, a huge burden for municipalities, most of which are cash-strapped anyway. But the cost of maintaining these buildings is probably higher, since it’s an ongoing expense. The reasons local governments want to tear down these buildings is simple: they’re old–the average age is 41 years–and the population is expected to continue decreasing. This number doesn’t include buildings that will be renovated or replaced after they are destroyed. It’s only buildings that will be gone for good. At the time the survey was conducted, 40 percent of these buildings were in use, while 47 percent were not in use at all and were thus shuttered. As far as plans for demolition go, 32 percent will be torn down “within a year or two” while the fate of 41 percent was “not known” at the time.

It’s a huge number, but if you’re at all familiar with construction trends in Japan it’s probably not shocking. Just walk through any business district in Tokyo and marvel at how many new skyscrapers are going up, replacing other buildings that were put up only thirty or so years ago. Buildings in Japan are notoriously short-lived, and, of course, outside of the large cities there is even less reason for keeping buildings that no longer serve a function. Populations and tax bases continue to shrink, so there is no need to maintain a school that has no students, or a public housing project that’s only 30 percent full. Read More

Earlier this week the national tax agency announced that, on average, land values throughout Japan went down 1.8 percent, raising hopes in financial circles since it’s the lowest drop in a long time. Any sign that the economy is improving is given a lot of play in the media, though a closer reading of the statistics indicates it may not be what it seems. As almost all the stories point out, the main brake on the drop in property values was the sudden surge in sales of luxury condos in the major cities. If you discount those sales, much of which is being spurred by overseas investors, the drop in value is pretty much the same as it’s been for the past decade or so. In Asahi Shimbun’s coverage, a reporter talked to a 37-year-old salaried worker who was looking to buy a used condominium in Ichikawa, Chiba Prefecture. He found one that was very cheap and only 10 minutes from Motoyawara Station, but was disappointed by the “undeveloped” quality of the neighborhood. A local realtor told the reporter that his business has not changed at all. Property values in the area are 4.7 percent less than they were a year ago, when the values were 4.4 percent less than they were in 2011. “The only place that’s any good is the center of Tokyo,” he said.

Another realtor in Kofu, Yamanashi Prefecture, told the paper that the value of properties near the main train station declined 3.8 percent over the previous year, and he didn’t sound hopeful, citing the fact that there has been no increase in the last year of “inquiries for home remodelings” that actually lead to contracts for work. “That’s because nobody’s income has increased.” The media was expecting a rush on home sales prior to the increase in the consumption tax next April, and until May, housing starts rose year-on-year for nine months straight. That statistic may go south, however, since there is a suspicion that interest rates will also go up in line with the government’s monetary easing policy, thus discouraging some potential new homeowners. Almost everyone Asahi talked to, from realtors to securities analysts, believe that the situation won’t change significantly unless average people start making more money.

Last week Tokyo Shimbun published a brief piece about possible good stock picks for next year, and it seems most analysts in Japan are saying that anything related to housing is a good bet. “It’s one of the few industrial sectors with promise,” said one. The main reason, as we’ve already mentioned in our other blog, is the consumption tax hike. It’s assumed that many people who are considering buying a home will want to beat the rise in the rate, which means they will have to sign a contract for the home sometime in 2013 since the rate will go up from 5 to 8 percent on April 1, 2014, so the completed house or condo has to be “transferred” (hikiwatashi) to the buyer before that date if the buyer wants to avoid the higher tax. Consequently, a lot of people will be trying to buy a home at the last minute. (Land sales are exempt from the consumption tax)

According a construction research laboratory attached to the land ministry (obviously an amakudari outfit), the number of new homes that will be built in 2013 will exceed 921,000, the first time the 900,000 mark has been breached in five years, representing a 5.2 percent increase over this year. Consequently, two other economic research centers, Nissei’s and Daiichi Seimei’s, project investment growth in the housing sector to grow by 10.8 percent and 11.4 percent, respectively. Two-digit growth in any sector is considered really, really good in this economy, and should benefit everyone from house manufacturers and condominium developers to realtors, lighting equipment makers, and construction material suppliers. The big house manufacturers like Pana Home, Daiwa House, Sekisui Heim, and Asahi Kasei (Hebel Haus), will rake in the most because they can respond to mass orders more quickly and thus help those last-minute buyers get their place built before the tax deadline.

It should be noted that this only applies to new homes, since the consumption tax is only levied on companies that make more than a certain amount of money. For the most part used homes don’t apply since most of them are transactions between individuals with realtors simply acting as go-betweens–which means you pay the tax on their fee, but not on the price of the house or condo itself. So, again, there won’t be much stimulus for the used housing market.

Last Wednesday, NHK’s in-depth news series, Closeup Gendai, covered the issue of abandoned houses (akiya) in Japan, a topic we’ve addressed several times on this blog. Though the report left out a number of points that we think are essential to the discussion, there is only so much NHK can cover in half an hour, and what they did cover was well considered. Of the major broadcast media, perhaps only NHK can do this since they do not have to worry about offending advertisers. Right now house manufacturers and developers, both of which rely on new housing construction for their livelihoods, buy huge amounts of broadcast time. Certainly the most important point that NHK made in the report is that the nation’s focus on new housing as a means of keeping the economy afloat is not sustainable.

The program reiterated a lot of statistics that we’ve already reported, in particular the figure of 7.57 million homes–single-family houses and condos–that stand vacant in Japan. That’s 13 percent of all residences. Of these, 1.81 million are classifed as being abandoned, meaning not only are they vacant, they are not for sale or rent either. They are just sitting there, about to collapse, all the while attracting garbage and arsonists. Thus they are not only eyesores but safety hazards, and the source of complaints by neighbors, who ask their local governments to do something about them. As we discussed in an earlier post, some localities have passed regulations that allow them to confront the problem, which is difficult to do because, as NHK pointed out, there is a “taboo” against public entities forcing themselves into matters having to do with private property. The model of this new public action is the city of Daisen in Akita Prefecture, where, as of 2011, there were 1,415 akiya. The problem was so bad that the city passed a law allowing authorities to demand of owners that such firetraps be torn down and if the owner did not respond then the city can move in a carry out the demolition itself. Sixty-one houses were initially targeted for action, but so far only two have actually been torn down. The main problem is locating the owners. As it turns out, many have never even registered the properties, which, of course, is illegal, and the first question that we thought of was: If a house was not on the city rolls, it means the owner never payed property taxes, so what was the city doing all these years? NHK didn’t ask that question. It did find the owner of one derelict house who said he had inherited it from his aunt but didn’t have the money (¥700,000) to tear it down. He thought he might be able to sell the land and then use the proceeds to pay for demolition, but he couldn’t find a buyer. So the city tore the house down and, presumably, absorbed the cost. Though the program didn’t say as much, it seems obvious that such a small city cannot afford to tear down every abandoned house in its jurisdiction. Read More

We’ve often talked about how the media has glossed over the worsening housing crisis. Though newspapers, magazines, and TV will occasionally run stories about specific cases of foreclosure in order to illustrate structual economic problems, they almost never connect these examples to the structural problems inherent in the nation’s housing policy, which hasn’t really changed for forty years. Our feeling is that the media itself has too much at stake in terms of advertising to point out these structural problems and that, fundamentally, the idea that new housing fuels the economy as a whole is so unassailable that it doesn’t even occur to many reporters that problems related to housing could be systemic and related to other social problems. But a few weeks ago, Shukan Bunshun ran an article that reflected, at least in part, much of what we’ve been trying to explain on this blog.

The article was about properties as legacies, which most people tend to view as “assets.” However, the reporter discovered that in many cases properties have turned out to be considerable liabilities for heirs, some of whom would prefer not inheriting them at all. The first illustration they give is the most potent. A 53-year-old man who lives and works in Tokyo recently traveled to his home town in Hiroshima Prefecture to dispose of his parents’ house, a 50-year-old wooden structure built on a steep grade. His father died six years ago and his mother, who suffers from dementia, entered a nursing home two years ago. The house is in disrepair and the small piece of land around it is overgrown with vegetation. The neighbors have repeatedly complained to local authorities, and the son understands that he has to do something. He decided to tear the structure down, but the lowest demolition estimate he could get was ¥2 million, owing to the fact that access to the property is difficult. Since he had no intention of using the land and couldn’t afford the demolition, he put it off. One could reasonably assume the cost might have been covered by selling the land, but that was another problem. The title was still under his father’s name, which meant, according to the law, it belonged to his mother. Since she was not legally competent to handle the matter, it fell to the next in line, his older brother, who had been estranged from the family for many years. No one knew how to get in touch with him. So in order for the second son to dispose of the property, he would first have to go to court to assume title, a process that would require a great deal of time and money, neither of which he had. Meanwhile, the neighbors become more angry, but the local authorities can’t do anything. Read More